austin , TX · Member since 2015 · 60 posts · 5 votes
My Borrower moved his company to Delaware making it an LLC there which makes me a bit worried that he might try something and try to get out of the loan by splitting the llc . Would it be advisable to move my LLC from Florida to Delaware also in the event I need to go to court to recover the loan would an llc in Delaware be better? . I have to get a lawyer there anyways and talk about the implication of him doing this without notifying me and redo the loan paperwork . Does anyone know a lawyer there that is familiar with hard money loans and could update the paperwork ? thx u
Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
1y
Let me guess, @Glenn N., the latest "guru" lawyer just rolled through town convincing the tin-foil-hat crowd that everyone is coming after them, and they need to pay him to arrange privacy and asset protection. Why else would they move their LLC?
I assume you are using professionally prepared loan documents, yes? These will certainly specify the jurisdiction and venue for any disputes, as well as the governing law. This doesn't change with your borrower's LLC. I hope you made it convenient for yourself.
Your loan documents should (or better) contain a due-on-sale clause. This allows you to call a default if your borrower transfers property ownership to another entity. Moving the LLC neither changes your loan, nor your lien, nor the personal guarantee I trust you obtained. Why are you losing sleep?
I wonder if your borrower's lawyer explained that if they move their LLC, they must still register as a foreign entity in the state where the property is located to defend against any actions you might bring. Congratulate them—they now get to file two sets of tax returns and pay the associated taxes for each.
Confirm all of this with a lawyer if it bothers you. Frankly, I wouldn’t lose a minute’s sleep over it.
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
1y
Your borrower is moving his company to DE….splitting his LLC….what does this even mean? @Jeff S. is 100% correct. Venue dictates where disputes are resolved and if it’s a loan collateralized against property and there’s a default the venue will be the municipality where the property is located even if the loan docs set venue elsewhere or parties have business dealings elsewhere. How else can the property be foreclosed on?
It's getting to a point where a new reason for an LLC or state where a LLC should be formed comes to life in these forums on a daily basis. Two days ago it was an investor who created an additional LLC independent of the deed holder entity believing tenants could only sue the LLC where a contractual relationship existed. Yesterday it was an investor who wanted advice on transferring his property from one LLC to another once the renovations were completed. Today it's to follow the state in which a borrower's LLC is formed. Where do these ideas even originate?